Social Security and Stocks: Safe Enough?
Retire at 80% of Final Pay--Guaranteed?

Stock safety in social security is equal to that of Treasury bonds. This study unequivocally demonstrates the continuous equal safety of stocks (equities) compared with Treasury bonds in a social security setting. And it shows that the magnitude of earnings superiority is 60 times more than bonds in buying power on average. It does not address fiscal-legislative remedies for the present system. But these are not difficult to mandate while maintaining all present commitments.

Stock profits can be enormous. But so can the apparent risks.

Everyone knows that. Retired workers want guaranteed, steady income, adjusted yearly for inflation, to replace partially the wages they no longer earn. Current law provides them with this. Is there a fit between these two sets of facts?

Despite these widespread, often vigorous, prevailing opinions and the accompanying cloud of misperception and ignorance of the historical relationships with bonds and inflation, the return from equities as a class of investments since 1871 (the earliest reliable data available) have always exceeded the return from government bonds as a class by enormous margins and, more important, have never had a loss with respect to the actuarial structure of a retirement fund. Let us look at this structure which expands returns beyond expectations and reduces to inconsequentiality the probability of any loss.

The table contains selected data. We must look at each yearly period to determine actual results with greater precision, and we have to consider overall increased administrative expenses (they are trivial compared with the expansion of benefits). This is done in the complete article (see below).